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Property prices fall by 13.6%

Thu, Aug 30, 2012, 01:00

Residential property prices nationally fell by 13.6 per cent in the year to July but rose by 0.2 per cent in the month, new figures show.

This compares with an annual rate of decline of 14.4 per cent in June and a decline of 12. 5 per cent in the 12 months to July of last year.

The slight rise in prices in the month of July compares with a drop of 1.1 per cent in June and a decline of 0.8 per cent in July 2011, according to the Residential Property Price Index published by the Central Statistics Office.

In Dublin, residential prices fell by 0.3 per cent in July and were 16.6 per cent lower than a year ago.

House prices in the capital were down 0.2 per cent in the month and were 16.7 per lower than a year earlier.

Apartment prices were 19.6 per cent lower compared with July 2011.

Residential property prices in the rest of Ireland (excluding Dublin) were up 0.3 per cent in July compared with a drop of 1.3 per cent in July of last year. Prices were 12.1 per cent lower than in that month.

House prices in the capital are now 56 per cent lower than at their highest level in early 2007, while apartment prices are some 63 per cent lower.

Residential property prices in Dublin are 57 per cent lower than at their highest level in February 2007.

In the rest of Ireland, the decline in the price of residential property since that time is 47 per cent, and overall the national index is 50 per cent lower than at its height in 2007.

"It's far too early to make any definitive judgement, but the broad picture emerging is one of a tentative stabilisation," said KBC chief economist Austin Hughes.

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"There is a consistent message across a range of domestic economic indicators that things have stopped getting worse though that doesn't mean there will be a dramatic turnaround."

Davy chief economist Conall Mac Coille said the data reflected transactions in the first half of 2012. New mortgage lending had hit a fresh low of just €974 million, well down on the €1.26 billion in the same period last year.

Prices reflected a "dysfunctional market", with with a very low level of transactions, particularly in rural areas.

Davy said anecdotal evidence suggested cash purchases accounted for up to 40 per cent of transactions, given weak lending, and that a lack of supply had supported prices in Dublin.

The firm noted census data showed the number of households with a mortgage and in unemployment had increased from 14,757 in 2006 to 50,792 in 2011.

Davy said transactions may pick up as banks eventually repossess and sell properties, or alternatively as the economy gradually began to recover.

"We retain our view that repossessions will have to rise, and coupled with weak mortgage lending and a slow recovery in the economy, house prices will fall further."

Merrion Economics also pointed out that the CSO data was based on mortgage draw-downs and didn't include cash transactions.

"On top of that, both the Irish central bank and ESRI have in recent research suggested that the housing market may be close to a bottom, with signs of pent-up demand among under-35s seeking to buy a family home, especially in Dublin," Merrion said.

It said it was difficult to see people rushing out to buy a house and to make a big monetary outlay when labour market conditions remained very fragile.

"All in all, we don’t see a major improvement in the housing market until there is clear evidence that the jobless rate has peaked and is on a sustained downward trend. Furthermore, the uncertainty of how a proposed property tax will be calculated is also likely to weigh negatively on house sales/prices in the run-up to December’s Budget."

Property website MyHome.ie, which is owned by The Irish Times, said it was “cautious and a little surprised” at the figures and that not too much should be read into them.

“The new poperty register which will record actual transaction prices is due to go live next month and that is a very welcome development,” said Myhome.ie managing director Angela Keegan.

“While we welcome the recent trend towards moderating price falls and greater price stability, the overall increase in prices and also the modest fall recorded in Dublin for July was unexpected,” she said.

Ms Keegan said there were supply shortages in certain areas and rising rental prices.

“Conversely the situation with regard to newer developments in rural locations is one of excess supply and large price falls,” she said.

Aoife Brennan, head of research at Lisney said she was not surprised at a monthly decrease in the Dublin index.

For some time, the agency had believed the CSO index was “lagging the market” by about six months.

“Consequently, we believe that the CSO index is under-playing the fall in residential prices.”

In Dublin alone, Lisney’s indices showed a ‘peak-trough’ decline of 64.1 per cent.

Ms Brennan said the firm believed Dublin house prices were currently stable and would remain so or increase slightly in certain areas in the short term due to shortages of stock and pent-up demand among buyers who saw value in the market.

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